Earnings Call Transcript - KNSA Q3 2021

Operator, Operator

Good day and thank you for standing by. Welcome to the Kiniksa Pharmaceuticals third quarter conference call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during that session, you will need to press star, one on your telephone. If you require any assistance during the call, please press star, zero. I would now like to hand the conference over to your speaker today, Ms. Rachel Frank. Ms. Frank, you may begin.

Rachel Frank, Company Representative

Thank you, Operator. Good morning everyone and thank you for joining Kiniksa’s call to discuss our third quarter 2021 financial results and our recent corporate and pipeline activity. A press release highlighting these results can be found on our website under the Investors and Media section. As to the agenda, our Chief Executive Officer, Sanj K. Patel will start with an introduction. Ross Moat, our Head of Commercial will provide an update on the Arcalyst commercial launch; Eben Tessari, Kiniksa’s Chief Business Officer will follow with a brief pipeline review; Mark Ragosa, our Chief Financial Officer will review our third quarter 2021 financial results, and finally Sanj will return for closing remarks and to kick off the Q&A session, for which John Paolini, our Chief Medical Officer will also be on the line. Before getting started, please note that we will be making forward-looking statements today that are subject to risks and uncertainties that may cause actual results to differ materially from these statements. A review of such statements and risk factors can be found on this slide, as well as under the caption Risk Factors contained in our SEC filings. These statements speak only as of the date of this presentation and we undertake no obligation to update such statements except as required by law. With that, I will turn it over to Sanj.

Sanj Patel, CEO

Thanks, Rachel. Good morning everyone. I’m happy to review our third quarter 2021 results today. We continued to make tremendous progress in bringing Arcalyst to patients in need, and we’re also executing across our portfolio of clinical stage product candidates. I’m delighted to report that net revenue for Arcalyst for the third quarter of 2021 was $12.1 million. As expected, recurrent pericarditis was the major growth driver for the Arcalyst Q3 sales. Ross will cover our commercial performance in more detail in a moment. We are very pleased with the implementation of our targeted commercial strategy. This includes broad patient and physician adoption and the viable reimbursement conditions. These core elements are what’s driving recurrent pericarditis sales and underscore the significant need for Arcalyst. Additionally, we remain focused on building the maximum value across our portfolio of clinical stage product candidates, and these are mavrilimumab, vixarelimab, and KPL-404, which is our CD40 program. We continue to expect data in the first quarter of 2022 from our Phase III trial of mavri and COVID-19 related ARDS, and Eben will highlight the potential opportunity in this patient population a little later. We continue to be energized by our progress across the entire portfolio and we believe that we are well positioned for longer term growth. I’ll now turn it over to Ross to discuss our commercial performance in more detail.

Ross Moat, Head of Commercial

Thank you, Sanj. We’re thrilled to report that Q3, our second quarter of launch, continued with very positive momentum and ended in great shape with a net revenue of $12.1 million. This represents a 57% quarter-on-quarter growth and, as anticipated, recurrent pericarditis was the major growth driver in Q3. Revenue from CAPS and DIRA indications remained stable and, as expected, the one-off inventory build that we saw in the launch quarter did not repeat in Q3; therefore, recurrent pericarditis demand grew from a base of approximately one-third of the $7.7 million in Q2 to more than three-quarters of the $12.1 million of revenue in Q3. We are delighted with the growth rate and it represents continued uptake and adoption of Arcalyst from physicians, payors and patients in this previously unmet and debilitating ultra-inflammatory cardiovascular disease. Taking into consideration the early launch trends, we have provided a Q4 net revenue guidance of between $16 million and $17 million. On Slide 8, I will dive into more detail on the drivers behind the recurrent pericarditis growth. We are very pleased with the continued broad physician adoption. At the end of Q3, there were more than 200 unique prescribers who had written Arcalyst for recurrent pericarditis since launch. This is more than double the number we reported in Q2, demonstrating rapid growth in the breadth of awareness and prescribing of Arcalyst. We are also starting to see an increase in prescribers who are writing for multiple recurrent pericarditis patients. Since launch, the commercial team has engaged with around 4,000 physicians, representing more than 80% of the initial target accounts. Furthermore, while we hear many other companies are continuing to engage remotely, we are achieving in excess of 80% of these prescriber interactions face to face. This highlights the favorable access we have to our target accounts as well as the eagerness of many physicians to learn about Arcalyst. On the payor side, we continue to see that more than 90% of all completed recurrent pericarditis patient enrollments were approved for coverage. We’re also pleased and encouraged to report that we have achieved broad access to a finalized payor policy for our target population, with greater than 190 million lives in the U.S. now having favorable coverage in place. This is higher and quicker coverage than our pre-launch expectations and allows physicians the confidence of gaining access when prescribing for their patients. As previously stated, we continue to expect that almost all of the remaining payors will update their coverage policies within one year of launch...

Eben Tessari, Chief Business Officer

Thanks Ross, and good morning everyone. I will provide a brief overview on where we stand with our three clinical stage programs, starting with vixarelimab. We are currently enrolling a global randomized placebo-controlled Phase IIb dose ranging trial in prurigo nodularis, testing three different once-monthly dosing regimens. This is a first-in-class mechanism that targets OSMR-beta, which mediates the two key cytokines implicated in pruritis, hyperkeratosis, and fibrosis. The primary efficacy endpoint is change in worst itch NRS at week 16, and we expect data from this trial in the second half of '22. For KPL-404, we plan to initiate a Phase II proof-of-concept trial in rheumatoid arthritis by the end of this year. RA is a disease where dose response has been well characterized, and this 12-week trial in RA patients is designed to provide not only PK characterization but also an early signal of efficacy with chronic administration in a well described patient population. The results from this study may also enable optionality to evaluate the therapeutic potential of KPL-404 across a range of autoimmune diseases with pathology believed to be mediated by CD40 signaling...

Mark Ragosa, CFO

Thanks Eben. Good morning everyone. Today I’m going to walk through our financial performance for the third quarter of 2021 and review our guidance. You can find our detailed financial information in today’s press release, and I’d like to call your attention to a few items. First, third quarter revenue was $12.1 million driven primarily by sales of Arcalyst in recurrent pericarditis, which more than doubled sequentially, as well as stronger than anticipated initial market access with greater than 190 million lives already covered in the United States. Second, based upon execution to date and strong third quarter sales, we expect total Arcalyst net revenue of between $16 million and $17 million in the fourth quarter of this year. Third, as a reminder, Kiniksa is responsible for the sales and distribution of Arcalyst for the approved indications in the United States, including CAPS and DIRA, and evenly splits profit on sales with Regeneron. When profitable, collaboration profit sharing will be reflected as a separate line item within operating expenses. In the third quarter of 2021, we did not make a collaboration profit sharing payment. Lastly, net loss for the third quarter of 2021 was $30.5 million compared to $43.8 million for the same period last year, and we ended the third quarter of 2021 with cash reserves of approximately $200 million, which we continue to expect to fund our current operating plan into 2023.

Sanj Patel, CEO

Thanks Mark. Turning to the last slide, which is Slide 18, at Kiniksa we are focused on building the maximum value across our portfolio. It’s a very exciting time for the company. We continue to maintain a strong start with the launch of Arcalyst in recurrent pericarditis. The positive feedback we continue to receive from physicians and patients validates the need for this therapy. As I mentioned previously, we are energized by our progress across our portfolio and we believe that we are well positioned to execute throughout this year and beyond. We are encouraged by the broad utility of mavri, seen today in COVID-19 and GCA, vixa in prurigo nodularis, and KPL-404’s potential in a range of autoimmune diseases. Importantly, as Mark mentioned, we are very well capitalized and we have cash reserves of $200 million that are expected to fund our current operating plan into 2023. With that, I want to thank you all for your time today, and I’ll turn the call back to the Operator.

Operator, Operator

Our first question comes from Anupam Rama of JP Morgan. Your line is open.

Anupam Rama, Analyst

Hey guys, thanks so much for taking the question, and congrats on the quarter. You guys noted that two-thirds of prescriptions for Arcalyst are being written for 12 months. For the other one-third, what type of duration are the prescriptions being written for, and are there any trends on the patient types that are getting a 12-month prescription versus another duration prescription? Thanks so much.

Sanj Patel, CEO

Ross, do you want to take that?

Ross Moat, Head of Commercial

Yes, I'm happy to. Thank you for the question. It's great to speak with you again. Two-thirds of the patients have prescriptions for a duration of 12 months, which we were pleased to observe as it provides valuable insight into how physicians are approaching the length of therapy. For the remaining one-third, the prescriptions were not for 12 months, which reflects physicians' expectations regarding follow-up appointments. Outside of that two-thirds, there are prescriptions that might be for three or six months. This does not necessarily indicate what they expect the treatment duration to be but could suggest that they plan to see the patient again, reassess their condition, and determine the treatment duration from there, ensuring a follow-up with the patient. Given that many physicians are new to Arcalyst and may be prescribing it for the first time, they might prefer closer patient follow-ups than may be typical in the long term. Regarding patient trends and types, the early stages of our launch have resulted in low patient numbers, making it challenging to establish clear correlations between disease types and treatment durations. It's tough to answer that definitively right now, but broadly, we are seeing two main categories of patients. The first group consists of clinically stable patients, either coming from our long-term extension study or from chronic steroid use. The second group includes patients who are acutely symptomatic and actively seeking targeted treatment. Regarding duration, what is prescribed does not necessarily reflect the actual eventual treatment duration. Ultimately, it will depend on the disease duration and the patient's position in their disease course. We know that continued treatment leads to ongoing responses, and stopping treatment too early can risk a rebound into symptomatic disease. We likely need more time to determine the eventual average duration in the midterm, and we look forward to providing updates on this in the future.

Anupam Rama, Analyst

Thanks so much for taking our questions.

Operator, Operator

Thank you. Our next question comes from Paul Choi with Goldman Sachs. Your line is open.

Paul Choi, Analyst

Thank you very much for taking our questions, and let me add my congratulations on the quarter as well. My first question is on commercial. With regard to as you go into see doctors here, can you maybe just comment on what factors are being cited as potential hesitancy to get RP patients onto Arcalyst? Is it primarily just access or reimbursement, or are they looking for any other particular pieces of information or clarification?

Ross Moat, Head of Commercial

I'm glad to address that question, Paul. Thank you for your inquiry. Regarding the challenges that some doctors face in prescribing, it's still early in the launch, and for many physicians, this is their first experience with the treatment. This aligns with previous remarks about their interest in seeing patients again and monitoring their progress in the initial stages of therapy. Beyond that, we don't see notable hesitancy from healthcare professionals; they are primarily waiting for the right patients to arrive. Given that this is a rare and episodic disease, we need to provide substantial education to raise awareness about this new treatment, which is the first approved for recurrent pericarditis. We're having productive discussions with physicians, and as patients start to come in, we expect to see an increase in prescriptions. Access and reimbursement questions are typical for physicians when a drug is relatively new to the market, but the approval rates we've observed from payors have been very promising. As we've noted, more than 90% of all completed cases have received approval, and with payor coverage expanding, now encompassing over 190 million lives across the U.S., we hope this will instill confidence in physicians and expedite the approval process, allowing patients to start therapy as soon as possible.

Paul Choi, Analyst

Okay, thanks Ross, that’s helpful. Then I think this question is on the pipeline, so maybe for Eben. I don’t know if I missed it on the slides here, but can you maybe just update us on what is the status of the Phase III plans for mavri in GCA, timing and trial initiation and so forth and trial design, and then also could you maybe help us understand how you’re thinking of potential development here and thinking about the trial in the context of Novartis recently announcing positive Phase II data for their IL-17, secukinumab? Thank you very much.

Sanj Patel, CEO

Thanks Paul, this is Sanj. Maybe the question would be better directed to John, but I’ll make a few comments. Obviously we’re very pleased with the Phase II results that we had in GCA and really showed a potential for true differentiation there. We have not disclosed or commented for our next steps immediately in terms of timing for GCA, but John can give you an idea as to what we’ve disclosed in the past on potential trial designs. John, over to you.

John Paolini, Chief Medical Officer

Sure, I'm glad to have this conversation again. Regarding the study design, we've previously discussed our positive Phase II trial outcomes, which spanned 26 weeks and included patients with new onset or relapsing refractory conditions. The Phase III design could be straightforward, potentially consisting of a single pivotal trial needed for the BLA submission. Our goal is to replicate the data while ensuring we have adequate safety data through 52 weeks of treatment, in accordance with ICH guidelines. Concerning the secukinumab data, we are aware of the recent positive results presented, which is beneficial for patients. We believe that mavrilimumab, by targeting both TH1 and TH17 driven diseases, particularly highlighting GMCSF and gamma interferon, could set it apart from other treatments. However, the ultimate differentiation will rely on clinical outcomes, and we feel optimistic about our program moving forward.

Sanj Patel, CEO

I think we’re having some technical difficulties. Should we move onto the next question, Operator, if you’re still there?

Operator, Operator

Yes, thank you. Next we have Geoff Meacham of BoA. Your line is open.

Jason, Analyst

Good morning everyone. This is Jason on for Geoff. Thanks so much for taking our questions and for the great quarter. A question on the payor dynamics for rilonacept, if you will. Can you help us understand kind of the current gross to net and where things are moving, or at least evolving? To what extent was there patient assistance and how is that changing, and what are your expectations moving forward? Then if I may, on the patient disposition, were the majority of patients that were treated, were these patients who were transitioning over from the clinical studies, were they sort of in the wings? Were these heavily refractory patients, somewhat new? Any sort of color there would be very helpful. Thanks so much.

Sanj Patel, CEO

Jason, this is Sanj. Maybe I’ll make an opening comment and then Ross or Mark can jump in. Obviously we’re still in the early stages of launch and, as you can expect, gross to net is quite fluid at this stage, so we aren’t providing any specific guidance or analysis on that. I’ll hand over to Ross and see if he wants to be a bit more effusive, but that’s where I’m at.

Ross Moat, Head of Commercial

Yes, I think you’re absolutely correct, Sanj. We’re not providing any specific guidance moving forward on the gross to net side and free goods. I guess the commentary that I can provide on that to help a little bit is that in Q3, we did benefit from the stronger than expected commercial payor mix, meaning a higher percentage of patients in the commercial insurance payor buckets opposed to government insurance leading to less statutory discounts, so there was some favorability in Q3 related to that, and also with lower copay utilization as well, meaning that we launched part of the way through the year in Q2, and actually what we found is that many of the patients had already reached their copay maxes applied to the Arcalyst prescriptions, so probably less support there around the copay than what we actually expected prior to the launch as well. Of course, this is very fluid at the time of launch, and I’m sure things will season and normalize as the future quarters go on. I think it’s important to say that our Q4 guidance takes into account the early launch experiences and trends that we’ve seen, so we’re comfortable in providing that guidance. In terms of free goods, patient affordability and access is incredibly important to us. Under Kiniksa One Connect, our patient services program, we do have different offerings for eligible patients, our patient assistance program bridge for people who may be in between insurers, and also a quick start program as well to help patients gain access whilst they’re waiting for coverage determination for eligible patients, so we’re very keen on making sure that’s available to patients as much as possible. But also, it’s worthwhile mentioning that the free goods are actually captured under our sales and marketing line in SG&A opposed to gross to net. On the patient disposition part, the long term extension transition really happened in the first quarter of launch, opposed to Q3, so really we’ve seen that, and what we announced in the prior earnings release was around 70% of the U.S. patients on the long term extension moved across to commercial coverage and commercial drug, so that’s really already happened, so in Q3 and beyond now, this is new patients coming through to have Arcalyst prescribed for the first time. We continue to be very focused on the 14,000 patients as refractory, the multiple relapsing and the steroid dependency patients, so that’s a core focus of our fill base team and everything that we do from a digital marketing perspective as well, but we’re also cognizant of the broad label that we achieved at the time of approval from the FDA, which actually allows physicians the flexibility to prescribe where they really think it’s going to help patients the best in recurrent pericarditis, so we continue to be focused on those patient groups. I guess it’s probably too early to comment on exactly how many patients there are within each of the buckets and so on - we’re just in the early stages of launch, but very pleased with how it’s been received out in the field, both with physicians and also payors and the number of patients, and we’re very happy that we now have more than 200 physicians that have prescribed Arcalyst since the time of launch, which is a doubling of the first quarter launch numbers.

Jason, Analyst

Got it, thank you so much.

Operator, Operator

Thank you. Next we have David Nierengarten of Wedbush. Your line is open.

David Nierengarten, Analyst

Thank you for taking my question. I have two inquiries. First, regarding patients using Arcalyst for recurrent pericarditis, do you have any data on the average time since their diagnosis? I'm interested to know if these patients have been dealing with the condition for a long time or if there is a trend toward patients who have been on other therapies for a shorter duration. My second question is about Vixa and the recruitment for the Phase IIb study. Is there any slowdown, or are you on track? How is that study progressing with patient recruitment right now? Thank you.

Sanj Patel, CEO

Thanks David. Ross, do you want to take a crack at starting that and I can always jump in, or me or John can jump in for the vixa.

Ross Moat, Head of Commercial

Yes, very happy to. Hi David, thanks very much for the question. In terms of the time of disease that the patients have had when they get prescribed Arcalyst, we really are not providing any metrics on that yet, just being at the very early stage of launch versus that changes as time goes on, but I guess the best marker that I can provide right now is maybe two data points. One is the natural history of recurrent pericarditis, where we see that that shows a mean duration of recurrent pericarditis of around two years, and then when you look at the more severe, if you like, patient population like we saw in the RHAPSODY study, the mean duration for those patients had already been 2.4 years on entry into the trial, so of course it’s highly variable dependent on the patient type, and that really plays into our messaging around the duration of treatment and naturally the duration of disease as well, and wanting to make sure patients have adequate duration to support through the underlying auto inflammation that they’re ultimately suffering from.

Sanj Patel, CEO

Does that cover your question on Arcalyst, David?

David Nierengarten, Analyst

Yes, it does. Thanks.

Sanj Patel, CEO

Good, and maybe I’ll start on vixa, and John, feel free to jump in. Vixarelimab, obviously as I said, we’re well underway with our dose ranging Phase IIb study, which we’ve said we expect data on the second half of next year. We continue to believe that prurigo nodularis, there is a significant unmet need and it’s obviously a devastating disease, and currently no approved therapy, so that’s obviously the backdrop. The Phase IIb study is a two-year global study driven by the 16-week time point, which is the primary key efficacy endpoint, so all I can say at this point is enrollment is ongoing in the U.S. and we are starting up in Europe and Asia, and we expect to have data in the second half. But you know, we tend to execute very well, and I think maybe John, if you’ve got any comments on the landscape or anything else on the trial?

John Paolini, Chief Medical Officer

No, Sanj, you made an excellent point regarding the trial design. I want to add one more thing about the endpoints. The primary endpoint is a 16-week measure related to the worst itch IRS. Additionally, a secondary efficacy endpoint is the achievement of IGA 0/1, indicating clear or almost clear lesions. This is based on the data we observed in the Phase IIa program, which demonstrated quick reductions in worst itch NRS and rapid healing of lesions.

Liisa Bayko, Analyst

Hi, thanks for taking the question, and great quarter. Two questions for me, the first one just on rilonacept. How are you thinking about now what the duration of therapy is going to be, and it’s just helpful when we think about projecting beyond 2021, I know there’s a comment here at the one-year anniversary of the long term extension, the median duration was 20 months, which is quite long. You now have prescriptions being written for 12 months - this is certainly beyond the six to nine months that was the initial range of thought for duration, so is your thinking on duration evolving from six to nine months? How would you help us think about that as we think about '22 and beyond?

Sanj Patel, CEO

Over to you, Ross.

Ross Moat, Head of Commercial

Yes, thank you Sanj. Hi Liisa, thanks very much for the questions. Regarding duration, I guess we’re still at the early stage, so it’s difficult to know what the eventual duration is going to be. I wouldn’t say we’re necessarily moving away from what we discussed previously, but just acknowledging that there are some unknowns particularly as we go into Q4 now, when we have a meaningful number of patients who are actually reaching the six to nine month mark, so I think Q4 is going to be helpful and telling around the potential duration of that time point that you mentioned. But outside of that, as we said, it’s dependent upon the disease, where the patients are in the duration of course of the disease...

Liisa Bayko, Analyst

As a follow-up to that, what are you observing? Have you conducted any market research regarding the reasons physicians might stop therapy?

Ross Moat, Head of Commercial

Yes, so we haven’t provided anything on that right now. John, I don’t know whether you want to take over on that point and provide any extra context around ceasing treatment, which might help. But outside of that, we haven’t shared anything else.

John Paolini, Chief Medical Officer

Sure, I'm glad to assist, Liisa. It's nice to talk to you again. You brought up an interesting question regarding how physicians monitor patients, particularly given the chronic nature of this disease and its long duration as indicated by epidemiological evidence. Specifically, it raises the question of how a physician can determine if they can safely withdraw therapy when a patient is doing well. This is where clinical trial data becomes valuable, showing that continued treatment leads to ongoing clinical improvement. Additionally, if the underlying disease is still active, stopping treatment too early can reveal the disease and lead to a recurrence of pericarditis. When it comes to the markers available to physicians, it can be challenging to draw conclusions solely from patient assessments. However, expert cardiologists often consider two key pieces of information. The first is evaluating the patient at the start of therapy, such as rilonacept, looking at their disease progression, duration, severity, frequency of recurrences, and associated co-morbidities. The second approach involves monitoring the patient during therapy, where imaging technologies can provide useful insights. Data from both the Phase II and Phase III studies at the Cleveland Clinic illustrate this point, particularly through a phenomenon known as delayed hyper enhancement, which indicates neovascularization of the pericardium. This can suggest the presence of ongoing autoinflammation, and the data indicate that stopping therapy may lead to a higher likelihood of recurrence. These are the two main factors currently available to clinicians in deciding whether to continue therapy, and I hope this information proves helpful.

Liisa Bayko, Analyst

Very helpful, thanks a lot. Then just a final question from me on vixarelimab, I know there was some data recently, over the last week or so, for dupi and PN. Maybe you could comment on that and how you see the competitive landscape evolving. As I understand, they also saw a resolution of lesions and a pretty nice NRS score, and are you thinking of that as some kind of temporary benchmark, or how should we think the dupi data in the competitive landscape? Thanks.

John Paolini, Chief Medical Officer

Sanj, would you like me to jump in on that?

Sanj Patel, CEO

Yes, go ahead.

John Paolini, Chief Medical Officer

Okay, sure. We’re aware of the data and what we see with the dupilumab data is that they’re pretty much consistent with what we’ve seen with other data from the dupilumab program, for example in atopic dermatitis. As you know, dupilumab blocks TH2 inflammatory responses, and then what we saw for atopic dermatitis and what we see also in prurigo nodularis is that there is a bit of a lag time, that first the inflammation resolves which then results in the reduction of the interleukin-31 levels, and so over time we see a reduction in the pruritis scores. Similarly, over the course of the long term trial that they showed, there was a gradual resolution of lesions, so I think that it certainly is a helpful dataset to see and consistent with what we’ve seen before. We believe vixarelimab is differentiated in this space because vixarelimab is blocking the action of interleukin-31 directly, and so that’s the reason why we saw a much more rapid and more profound reduction in pruritis scores even in the early weeks after initiation of therapy. If you’ll remember from our Phase IIa data, we saw nearly a third of patients had achieved clear or almost clear - that was statistically significant at week 8, but it was also significant at week 6 with early curve separation as early as week 4. I hope that’s a helpful comparison of the data, understanding it’s across trials.

Liisa Bayko, Analyst

Great, thank you very much.

Operator, Operator

Thank you. I see no further questions in the queue, so speakers, I return the call back to you for closing comments.

Sanj Patel, CEO

Thanks Operator. Thanks everybody for joining in today, obviously a great quarter, a lot more to do. We’re very excited about both Arcalyst as well as the pipeline, and we’re going to crack on. Thank you, bye bye.

Operator, Operator

This does conclude today’s conference call. Thank you all for participating. You may now disconnect and have a pleasant day.